Fitbit Earnings: ‘Stepped Up Our Game,’ Says CFO

Wearable technology pioneer Fitbit (FIT) this afternoon reportedQ1 revenue and profit that that topped analysts' expectations, but forecast this quarter weaker than expected as older devices continue to wither in demand.

Fitbit stock was gyrating quite a bit in late trading. The shares are currently down 10 cents at $5.40.

CEO James Park spoke by phone with my college Alex Eule this afternoon. He told Alex the company's newest smartwatch, the "Versa," introduced in the quarter, had the best first week of sales of any device the company has ever made. "We're definitely happy with how it's doing," he told Alex.

CFO William Zerella was also on the call, and told Alex that the company's gross profit margin, which jumped to 47.1% from 40% a year earlier, was helped by lower warranty costs. Fitbit was able to achieve that, said Zerella, because of improved quality: "We've really stepped up our game in terms of quality and we're seeing that across the board."

Revenue in the three months ended March rose to $248 million, yielding a net loss of 17 cents per share, excluding some costs.

Analysts had been modeling $247 million in revenue and a net loss of 20 cents a share.

Fitbit said its salesof smartwatches overall, including Versa, "nearly doubled," and made up 30% of its revenue.

Versa had "strong pre-orders" the company said, and "the best sell-through sales in North America of any device in the company's history in the first week of availability."

For the current quarter, the company sees revenue of $275 million to $295 million, below the consensus $310 million estimate.

Net loss per share is seen in a range from a loss of 23 cents to a loss of 27 cents, wider than the average estimate for a loss of 12 cents per share.

Fitbit said the outlook includes a continued decline in demand for its original product, the fitness tracker:

We expect results to be impacted by the reduced demand by the channel for trackers, partially offset by an increase in smartwatch revenue, driven primarily by Versa sales. We expect smartwatches to grow as a percentage of revenue, but our overall mix to continue to be skewed towards trackers.

Sign up to Review & Preview, a new daily email from Barron’s. Every evening we’ll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning.

Fitbit Earnings: ‘Stepped Up Our Game,’ Says CFO

Wearable technology pioneer Fitbit (FIT) this afternoon reportedQ1 revenue and profit that that topped analysts' expectations, but forecast this quarter weaker than expected as older devices continue to wither in demand.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.